Canadian Stocks Outperform U.S. Most Since ‘Black Monday’

By Victoria Taylor -
Aug 10, 2011

Canadian stocks rose, outperforming
their U.S. peers by the most since October 1987, as gold
producers rallied amid concern that the U.S. economic recovery
is stalling and Europe won’t be able to contain its debt crisis.

Barrick Gold Corp. (ABX), the world’s largest producer, rose 6.2
percent as the precious metal climbed to a record. Crude oil
surged to its biggest one-day gain in three months in New York
amid speculation the Federal Reserve will buy more assets to
bolster the economy. Manulife Financial Corp. (MFC) fell 5.2 percent
the day before the insurer is scheduled to report earnings.

The Standard & Poor’s/TSX Composite Index (SPTSX) rose 89.63
points, or 0.7 percent, to 12,198.89 at 4:10 p.m. in Toronto.
The Canadian equity benchmark beat the S&P 500 index by 5.16
percentage points, the most since the day known as Black Monday,
Bloomberg data show. The figures don’t include days after one of
the markets was closed. Energy and raw material companies make
up 48 percent of Canadian stocks by market value.

“Investors are looking more at oil and gold and decided to
buy stocks that are basic materials-related,” Stephen Gauthier,
a money manager at Fin-XO Securities in Montreal, said in a
telephone interview. Fin-XO Securities oversees C$600 million
($620 million). “The perception is the gold is going up, oil is
going up, so resources are doing well.”

The S&P/TSX rallied the most since May 2009 yesterday after
the U.S. Federal Reserve pledged to keep its interest rate at a
record low. Policy makers said they were prepared to use a range
of tools to boost the economy that is “considerably slower”
than expected. The S&P cut the U.S. credit rating for the first
time on Aug. 5.

Debt Crisis

The cost of insuring French debt rose to a record today as
Europe’s debt crisis made investors wary of lending to any
nation other than Germany. The European Central Bank bought
Italian and Spanish bonds for a third day as it tried to halt a
market rout.

The S&P/TSX financial stock index fell 1.1 percent after
rising the most since May 2009 yesterday. Toronto-Dominion Bank,
Canada’s second-largest lender by assets, declined 1.5 percent
to C$73.93 in Toronto trading. Royal Bank of Canada (RY), the
country’s biggest bank, declined 1 percent to C$49.73. A gauge
of financial stocks in the Standard and Poor’s 500 Index fell
7.1 percent.

“Either the financials are reacting a little too much in
the U.S. or in Canada, people aren’t paying enough attention to
what’s happening internationally,” Gauthier said.

Earnings Tomorrow

Manulife Financial, North America’s fourth-largest insurer,
retreated 5.2 percent to C$12.50, the lowest price since Oct.
15. Macquarie Capital Markets Canada Ltd.’s Sumit Malhotra said
in a note dated today that the company’s second-quarter earnings
report “won’t be great” and that the company will have a loss
in the third quarter. Manulife discloses results tomorrow.

Gold rose as high as $1,801 an ounce as the S&P/TSX gold
stock index surged the most since February 2010. Goldcorp Inc. (G),
the world’s second-largest producer of the metal, advanced 6.5
percent to C$50.31. Barrick rose 6.2 percent to C$49.72 in
Toronto trading.

Yamana Gold Inc. (YRI), the country’s fourth-largest producer,
gained 7.3 percent, the most since November 2009, to C$14.86.
Agnico-Eagle Mines Ltd. advanced 5.2 percent to C$62.48.
Canada’s fifth-largest gold producer rose for a fourth day, the
longest streak of gains since May 30.